JOHN HUIZINGA, JOEL STERN, AND MARVIN ZONIS EXPRESS CONCERNS ABOUT INFLATION, PRODUCTIVITY AND THE FALLOUT FROM THE ASIAN CURRENCY CRISIS. THE OUTLOOK FOR the coming economic year is relatively positive, but signs and portents suggest that the end of the current economic golden age is coming, experts predicted at the annual Business Forecast Lunch on December 3. Veteran forecasteers John Huizinga, Joel Stern, and Marvin Zonis expressed concerns about inflation, productivity, and fallout from the Asian currency crisis. Stern, ’64, managing partner of Stern Stewart & Co., predicted that 1998 will be a great year–but then watch out for inflation. “The monetary aggregates have been growing much, much too quickly,” Stern said. “Another six months of this and the consumer price index will really start to take off by the fourth quarter of 1998.” Based on these predictions, Stern gave the audience of 1,400 a little business advice. “Around September 1998, the annualized monthly numbers will begin to accelerate,” he said. “Don’t plan your public offering or company sale after September.” On the positive side, Stern said the southeast Asian crisis should not be life-threatening to U.S. economic expansion. He predicted that corporate profits will continue to grow, unemployment will stay low, and that the budget deficit will the smallest in 10 years. “All in all, ’98 will be fabulous,” he concluded, “but I fear it will be the last in this economic expansion.” Huizinga didn’t share Stern’s concerns about inflation, expressing confidence that the Federal Reserve would control it. Like Stern, Huizinga wasn’t worried about a domestic economic slowdown yet. “There should be plenty of demand for U.S.­produced goods and services among U.S. consumers, businesses, and government to offset a reduction of demands for exports,” said the Walter David “Bud” Fackler Professor of Economics and deputy dean for the faculty. However, it’s questionable whether the United States can increase production to meet the increased demand, Huizinga said. There is little chance that productivity can be increased through lower unemployment, higher labor force participation, or more hours worked per employee. “Increasing productivity of existing labor input is the only way to go,” he said, “but we haven’t seen much evidence that it will happen.” Zonis also predicted that the U.S. economy would weather global shocks fairly well. He foresaw a possibility that the global economic boom will end, international equity values will continue to fall, and foreign currencies will remain weak against the dollar. “U.S. economic growth rates will fall along with exports, corporate profits, and equity prices, [but] the result would by no means be a major decline for the U.S. economy,” assured Zonis, professor of business administration and principal of Zonis and Associates, an international political and economic consulting firm. Zonis compared the current Asian situation to the 1982 Mexican debt crisis. “The 1980’s were a lost decade for all of Latin America,” he said. “So the coming years are likely to be in southeast Asia.” The greatest challenge for southeast Asian countries will be to manage their slowdowns in a way that prevents major political instability, Zonis said. He predicted that many will be unable to do so. “Uncertainty will be widespread,” Zonis concluded. “In short, we will all be nervous about 1998.”
						1998 Business Forecast HUIZINGA STERN Real GDP +2.5% +4.1% General Price Level (IPD) +2.0% +2.3% Nominal GDP +4.6% +6.5% Real Consumer Spending +2.9% +4.1% Real Business Spending +3.4% +3.9% Real Government Spending +1.9% +1.5% Real Net Exports -14.2% -19.3% Unemployment (year’s average) -0.2% 0% Real Corporate Profits (after taxes) +5.5% +15.0%
		E-Mail GSB Chicago - Front Page - GSB Home - Current Issue -Archive